Fool
Portfolio Report
Wednesday, March 04, 1998
by David Gardner ([email protected])
ALEXANDRIA, VA (March 4, 1998) -- It's an exciting day at Fool HQ, as we're proud to launch our newest contest, Stock Madness, a 64-stock tournament in which you try to predict the ultimate winner. There's more to follow, but first the report...
The Fool Portfolio split the difference between a gaining Nasdaq (+0.15%) and a falling S&P 500 (-0.45%), completing a rather dull day on Wall Street. For our stocks, anyway... I suppose no single day is ever uniformly dull on Wall Street.
In fact, the action heated up after market close, when Intel (Nasdaq: INTC) announced first-quarter earnings would be below expectations. AOL now shows down $4 (though that will be counted in tomorrow's returns), and other companies like Dell and oh yeah, Intel itself, are apparently trading down 5%-10%. (These quotes don't show up on Fool quotes, but the story's out on the wires.) Bloomberg was reporting at 6 PM EST that S&P 500 futures were trading down about 1%, or the equivalent of 90 Dow points.
So looks like tomorrow will be a money loser too, and any warm fuzzy feelings that we had about beating the S&P today have quickly dissipated as we look forward to tomorrow.
NOT that we care about tomorrow's trading, in particular, as we've noted time and time again, dear Fools. Yes, we do follow our stocks daily, just as we follow our sports teams daily... but we trade our stocks only slightly more frequently than we change our favorite sports team. In other words, when the brokers say "Dance," we continue to play the wallflower.
Hurting the Fool today was our Trump (NYSE: DJT) short, which rose $11/16 to $10 7/8 following a lamentable earnings report for the fourth quarter, issued after market close yesterday. Apparently, for one day the market managed to get excited about the company losing $1.24 per share in its fourth quarter. Estimates had been for a loss of 72 cents. The story remains essentially unchanged, going forward. Tiny will continue to try to sell his company for $28 a share, as he stated in The Wall Street Journal.
(If that sentence made no sense to you, read the Monday report.)
Our biggest excitement today -- in fact, the primary reason we stayed ahead of the S&P 500 -- came from the combined efforts of Cowen & Co. and DLJ. These two Wall Street firms teamed up on a twin upgrade to BUY for our 3Com (Nasdaq: COMS) stock, sending COMS shares up $2 5/8 on this forgettable day. No story, of course, since Wall Street firms don't publicly disclose their reasoning, but we'll guess from afar that they like the stock more today than they did yesterday.
Truth be told, Reuters did issue the slightest of explanations, reporting, "DLJ said the company's channel inventory problems appear to have passed and investors should now start to value 3Com based on its strong new products." As always, for the real scoop just head directly to our 3Com message folder, where stuffed modem channels have been discussed actively for weeks now.
Amazon.com (Nasdaq: AMZN) rose $1 3/4 this afternoon, closing at a bid of $73 1/4. Discussion in that message folder has recently involved the possibility that the stock is being driven up by a short squeeze. This I consider a very real possibility, yes indeedy. After all, with a "float" (the actual number of shares available to be traded) on the stock roughly only double the existing short interest (shares that have been sold short), it would seem ripe for the pickin'. And in fact last week's $14 rise to $77 would have to have sent the shorts scattering.
What happens when a short scatters? Answer: he covers his losing position. How does he do that? He buys his way out of it. Thus, "short squeezes" involve an artificial boost in a stock that has been "over-shorted" following an announcement of good news. The shorts got out in droves last week, I'd guess, as Amazon announced it would be expanding into CDs, and then President Clinton mentioned the company as a beneficiary of a new proposal banning the creation of new taxes on Internet commerce.
Is Amazon artificially inflated by a stock squeeze at this point? Your guess is as good as mine. One thing I can say for sure: it's a possibility. Another thing I can say for sure: it'll be obvious only in retrospect... as Iomega's was, later on, after it had made that outrageous run to (a now split-adjusted) $27, way back when.
Do long-term investors care about short squeezes? Not really. We're not looking to get out anytime soon. We don't watch share prices too carefully... we watch businesses.
Finally tonight, a new gaming treat for Foolish investors is upon us, the introduction of our Stock Madness game! The game is inspired by, and synced up with, the March Madness college hoops tournament starting a week from tomorrow. We're very fortunate to have with us Todd Etter (TMF Knave), the creator of the game.
Dave: It's a pleasure to have you in the office today, Todd.
Todd: No problem, Dave. Now maybe you'll finally return my car that you borrowed last---
Dave: OK! So, tell us a little bit about Stock Madness.
Todd: Well, in Stock Madness, we've created a 64-stock, single-elimination tournament. Each week, pairs of stocks face off, with the winner advancing. You try to pick---
Dave: Ah, playing off the ol' March Madness NCAA basketball tourney, I see. Sounds neat.
Todd: Yes, it should be a lot of fun. As I was saying, you'll be picking which stocks you think will advance, all the way to our mythical national championship. The grand prize---
Dave: Cool, count me in. What are the prizes?
Todd: Uh... okay. The grand prize is a set of Prince golf irons. Plus we also have gift certificates to FoolMart, our online store. Be sure to check out the humorous regional writeups, which include---
Dave: Oops, gotta run! Time to wash my hair. Thanks again, Todd. It was a pleasure to---
Todd: A pleasure you say? Ha-ha! Got you back. Anyway, be sure to check out the game at our main Fooling Around page on the Web.
Dave: Thanks, Todd. Fool on!
WE
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TODAY'S
NUMBERS
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Day Month Year History FOOL -0.11% -1.89% 3.94% 248.82% S&P: -0.45% -0.19% 7.92% 128.48% NASDAQ: +0.15% -0.61% 12.06% 144.34% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 116.75 1505.28% 5/17/95 1960 Iomega Cor 1.28 9.06 607.78% 10/1/96 42 LucentTech 47.62 106.25 123.14% 9/9/97 290 Amazon.com 38.22 73.25 91.65% 8/12/96 130 AT&T 39.58 61.75 56.02% 1/8/98 115 S&P Depos. 95.91 104.81 9.29% 2/20/98 215 DuPont 59.83 62.19 3.93% 2/20/98 270 Int'l Pape 47.69 48.50 1.69% 2/20/98 200 Exxon 64.09 63.44 -1.02% 8/24/95 130 KLA-Tencor 44.71 42.31 -5.37% 1/8/98 425 3Dfx 25.67 22.88 -10.88% 8/13/96 250 3Com Corp. 46.86 37.69 -19.58% 6/26/97 325 Innovex 27.71 21.88 -21.06% 4/30/97 -1170*Trump* 8.47 10.88 -28.41% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 41446.25 $38864.38 5/17/95 1960 Iomega Cor 2509.60 17762.50 $15252.90 9/9/97 290 Amazon.com 11084.24 21242.50 $10158.26 8/12/96 130 AT&T 5145.11 8027.50 $2882.39 10/1/96 42 LucentTech 1999.88 4462.50 $2462.62 1/8/98 115 S&P Depos. 11029.25 12053.44 $1024.19 2/20/98 215 DuPont 12864.25 13370.31 $506.06 2/20/98 270 Int'l Pape 12876.75 13095.00 $218.25 2/20/98 200 Exxon 12818.00 12687.50 -$130.50 8/24/95 130 KLA-Tencor 5812.49 5500.63 -$311.87 1/8/98 425 3Dfx 10908.63 9721.88 -$1186.75 6/26/97 325 Innovex 9005.62 7109.38 -$1896.25 8/13/96 250 3Com Corp. 11715.99 9421.88 -$2294.12 4/30/97 -1170*Trump* -9908.50 -12723.75 -$2815.25 CASH $11233.54 TOTAL $174411.04
